PATIDAR BUILER PRIVATE LTD.,BHOPAL vs. ASSESSING OFFICER, BHOPAL

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ITA 556/IND/2023Status: DisposedITAT Indore28 July 2025AY 2010-118 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal partially allowed the appeal. Regarding Ground No. 1 (Section 40A(3) disallowance), the Tribunal noted that the assessee had made cash payments attracting disallowance. While the assessee initially argued for genuine expenses, this was conceded as unsubstantiated. The defense based on Rule 6DD(j) for payments on Saturdays and Sundays was partially accepted. The Tribunal agreed that the payment of Rs. 41,730/- made on a Sunday to M/s Laxmi Iron qualified for the exception. Therefore, the disallowance was deleted to this extent, and the rest was upheld. Regarding Ground No. 2 (Bad Debts), the Tribunal found that the assessee had not filed sufficient supporting evidence before the lower authorities or the ITAT. However, considering that Ground No. 3 was being remanded, the Tribunal decided to remand Ground No. 2 to the AO for fresh adjudication, allowing the assessee an opportunity to submit evidence. This would advance the cause of justice. Regarding Ground No. 3 (Unexplained Advances), the Tribunal observed that the CIT(A) had not discussed the assessee's application for additional evidence. Both parties agreed that the issue should be remitted to the AO for fresh adjudication after considering the assessee's evidence and providing necessary opportunities. The Tribunal allowed this ground for statistical purposes.

What were the facts?

The assessee, Patidar Builder Pvt. Ltd., is a company engaged in the business of builders and developers. For Assessment Year 2010-11, it filed a return declaring a total income of Rs. 13,11,535/-. The Assessing Officer (AO), JCIT, Range-2, Bhopal, selected the case for scrutiny and passed an assessment order under Section 143(3) on 28.03.2013, determining the total income at Rs. 2,23,92,730/- after making disallowances and additions. The assessee appealed to the CIT(A)-NFAC, Delhi, who passed an order on 11.12.2023, granting partial relief. The assessee is now in further appeal before the Income Tax Appellate Tribunal (ITAT), Indore Bench, challenging the CIT(A)'s order.

What were the issues?

The Income Tax Appellate Tribunal (ITAT) had to decide three issues raised by the assessee: 1. Whether the learned CIT(A) erred in confirming the addition made by the AO under Section 40A(3) of the Income-tax Act, 1961, amounting to Rs. 6,37,595/-, on account of payments made in violation of the section. 2. Whether the learned CIT(A) erred in confirming the disallowance made by the AO in respect of bad debts amounting to Rs. 29,42,407/- under Section 37 of the Act. 3. Whether the learned CIT(A) erred in confirming the addition made by the AO under Section 68 of the Act amounting to Rs. 4,37,51,207/- (assessee claims correct amount should be Rs. 46,43,800/-) by holding it as bogus and non-genuine, and whether the CIT(A) erred in not deciding the ground fully with respect to advances amounting to Rs. 2,68,480/- made by the AO. Assessee's Contentions: For Issue 1, the assessee argued that payments were made on Saturdays and Sundays, and therefore, the exception under Rule 6DD(j) of the Income-tax Rules, 1962, should apply as banks were closed. The assessee agreed that the payments were for genuine business expenses but conceded this claim was unsubstantiated. For Issue 2, the assessee requested that the issue be restored to the AO for fresh adjudication, stating it would make one more effort to gather evidence for the claimed loss on an unrecovered advance. For Issue 3, the assessee contended that advances received from customers were either adjusted against sales or refunded, and sought admission of additional evidence before the CIT(A). Revenue's Contentions: For Issue 1, the Revenue's Senior Departmental Representative (Sr. DR) opposed the assessee's claim regarding bank holidays. For Issue 2, the Revenue's Sr. DR objected to restoring the issue to the AO, arguing that the assessee had not produced any evidence till date. For Issue 3, the Revenue's Sr. DR did not explicitly record arguments, but the lower authorities had rejected the assessee's submissions.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 37,Section 68,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI

For Appellant: Shri Pankaj Shah & Soumya Bumb, ARs
For Respondent: Shri Ashish Porwal, Sr. DR
Hearing: 23.07.2025Pronounced: 28.07.2025

आदेश/ O R D E R

Per B.M. Biyani, A.M.:

1.

Feeling aggrieved by order of first appeal dated 11.12.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 28.03.2013 passed by learned JCIT, Range-2, Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2010-11, the assessee has filed this appeal.

2.

The background facts leading to present appeal are such that the assessee is a company engaged in the business of builders and developers. For AY 2010-11 under consideration, the assessee filed return declaring a total income of Rs. 13,11,535/-. The case was selected for scrutiny and the Page 1 of 8 Finally, the AO passed assessment-order u/s 143(3) determining total income at Rs. 2,23,92,730/- after making certain disallowances/additions.

Aggrieved, the assessee carried matter in first-appeal and got part relief. Still aggrieved, the assessee has come in next appeal before us.

3.

The grounds raised by assessee are as under:

“ 1. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the addition made by Assessing Officer under Section 40A(3) of the Act amounting to Rs.637595/-. The Appellant prays that the addition be directed to be deleted.

2. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the disallowance made by Assessing Officer in respect of bad debts amounting 294240/- under Section 37 of the Act. The Appellant prays that the disallowance be directed to be deleted.

3. On the facts and circumstances of the case and in law the learned CIT(A) has erred in confirming the addition made by Assessing Officer under section 68 of the Act amounting to Rs. 4375120/- holding it as bogus since non- genuine. Further the CIT(A) erred in not deciding the ground in full with respect to advances amounting to Rs. 268480/- made by the AO. The Appellant prays that the said advances be held as genuine and the addition be directed to be deleted.”

Ground No. 1:

4.

In this ground, the assessee challenges the disallowance of Rs. 6,37,595/- made by AO and upheld by CIT(A) on account of payments made in violation of section 40A(3).

5.

Having heard the learned Representatives of both sides and on a careful consideration of the details of payments filed by Ld. AR for assessee

Page 2 of 8 cash payments on different dates/days to the suppliers of material and labour purchased by assessee for consumption. The details submitted by Ld.

AR clearly indicates that the suppliers are private parties. Ld. AR agrees that the payments attract disallowance u/s 40A(3) but he defends assessee’s case on two-fold premises. The first defense pleaded by Ld. AR is such that all payments have been made towards genuine business expenses and hence disallowance should not be made. However, this pleading is made for the sake of argument only and we indicated to Ld. AR during hearing itself that his contention/claim remains unsubstantiated to which Ld. AR instantly agreed. Therefore, the pleading is rejected.

6.

The second defense made by Ld. AR is such that following payments were made on Saturdays and Sundays:

Ld. AR submitted that the assessee deserves benefit of following exception provided in Rule 6DD(j) of Income-tax Rules, 1962 according to which the payment required to be made on a day on which banks were closed on account of holiday cannot be disallowed:

Page 3 of 8 AY 2010-11 “(j) Where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike.” Initially, Ld. AR submitted that the banks were closed on Saturdays and Sundays but on further deliberation and strong opposition by Ld. DR for revenue, the Ld. AR agreed that he does not have any evidence to establish that the banks were closed on Saturdays (in the year 2009 / 2010 when the impugned payments were made). However, he submitted that the banks certainly remain closed on Sundays. Ultimately, both sides agreed that the benefit can be granted to assessee for the payment of Rs. 41,730/- made on Sunday to M/s Laxmi Iron appearing at S.No. 5 in the Table above. In that view of matter, we delete the disallowance to the extent of Rs. 41,730/- and uphold rest of the disallowance. The AO will modify assessment-order accordingly. This ground is partly allowed.

Ground No. 2:

7.

In this ground, the assessee challenges the disallowance of Rs. 2,94,240/- made by AO and upheld by CIT(A) on account of deduction of bad debt.

8.

Having heard the learned Representatives of both sides and on a careful consideration of the facts of issue narrated by Ld. AR in Written- Synopsis, we find that the assessee claims that a sum of Rs. 5,00,000/- was given by way of advance to one “Shri Chatur Narayan” on 16.08.2007 vide Cheque No. 705791 towards buying a piece of land. However, the deal was Page 4 of 8 remaining amount of Rs. 2,94,240/- could not be recovered, the assessee ultimately debited to P&L A/c and claimed deduction. The issue was deliberated and it is observed that the assessee has not filed any supporting evidence before lower authorities and even before ITAT except filing the Ledger A/c of Shri Chatur Narayan extracted from its own books of account.

Ld. AR for assessee, however, requested that the assessee has claimed a genuine deduction of loss suffered by it and the same should not be disallowed for lack of evidence. Ld. AR requested that the assessee shall make one more effort to gather evidence in this regard and hence this issue may be restored to the file of AO for a fresh adjudication. Ld. DR for revenue, however, objected and submitted that the assessee has not brought any evidence till now, hence the disallowance made by AO must be upheld without giving any further opportunity to assessee. After a careful consideration, we find that since we are remanding the next Ground No. 3 to the file of AO for a fresh adjudication, there would be no prejudice to revenue if this issue in Ground No. 2 is also restored at the level of AO. At the best, the restoration of this issue to AO would advance the cause of justice by enabling the assessee to submit evidence and at the same time, the AO would be able to make a better adjudication to collect legitimate tax from assessee. If the assessee still fails to submit evidence before AO, the AO would be entitled to make addition. In that view of matter, we remand this ground to the file of AO for a fresh adjudication after considering any Page 5 of 8 opportunities to assessee. Accordingly, this ground is allowed for statistical purpose.

Ground No. 3:

9.

In this ground, the assessee challenges the addition of Rs. 43,75,120/- (correct amount should be Rs. 46,43,800/-) made by AO and upheld by CIT(A) on account of unexplained advances received from customers.

10.

Having heard learned Representatives of both sides and on a careful consideration of the orders of lower-authorities, we find that the assessee has received impugned advances from 10 customers (Page 9 of assessment- order). During assessment-proceedings, when the AO asked assessee to explain these advances, the assessee filed a detailed reply dated 22.03.2013 which is re-produced by AO in Para 7.2 of assessment-order. In the reply so submitted, the assessee claimed that the impugned advances received from customers were either adjusted against sales made to those customers or refunded to those customers in subsequent years from time to time. But the AO, vide Para 7.3 of assessment-order, rejected assessee’s submission for want of supporting evidences. Although the AO made an attempt to collect evidences from customers through the process of section 131 but did not get any support from those customers also. Ultimately, the AO concluded against assessee and made addition. During first-appeal, the assessee filed

Page 6 of 8 assessee also filed an application under Rule 46A of Income-tax Rules, 1962 to CIT(A) for admission of additional evidences, copy of assessee’s application is filed at Page 58 of Paper-Book. However, the CIT(A) has echoed the observations of AO only and has nowhere discussed the assessee’s application and the evidences so filed. After deliberation, the learned Representatives of both sides were ad idem that this issue should go back to the file of AO for adjudication afresh. We accordingly remit this issue to AO for a fresh adjudication after considering assessee’s evidences and after giving necessary opportunities to assessee. The ground raised by assessee is allowed for statistical purpose.

11.

In the final result, this appeal is allowed partly.

Order pronounced in open court on 28/07/2025

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